The shareholders of Flannery Company have voted in favor of a buyout offer from Stultz Corporation. Information about each firm is given here:
Price-earnings ratio 5.60 16.80
Shares outstanding 59,000 177,000
Earnings $225,000 $900,000
Flannery's shareholders will receive one share of Stultz stock for every four shares they hold in Flannery.
(a) What will the EPS of Stultz be after the merger? Round your answer to 2 decimal places. (e.g., 32.16)
(b) What will the PE ratio be if the NPV of the acquisition is zero?(Round your answer to 2 decimal places. (e.g., 32.16)
PE ratio: ______
What is the value of Flannery to Stulz?
Value of Flannery to Stulz: $___________
(a) Total Earnings after the merger = $225000+$900000=$1125000
Outstanding shares = shares issued to Flannery shareholders + outstanding shares of Stultz before the merger
EPS = Total earnings / total ...
Provides steps necessary to determine value of EPS, PE and Mergers.